Limited company borrowing hits three-year high

The BTL sector sits under a constant regulatory microscope, as evident by the array of tax and legislative change seen over the past five years or so. These changes continue to shape how many landlords are structuring their portfolios and have resulted in far more activity at the more ‘professional’ end of the landlord spectrum than at the ‘amateur’ end.

Arguably the largest impact from this has been the growth in limited company BTL lending. And this is showing no sign of slowing anytime soon, quite the opposite in fact. So much so that the proportion of landlords who plan to purchase their next buy-to-let property through a limited company has hit the highest level for three years.

An uplift from 50% in the first quarter of the year to 62% in Q2 2022 has led to a three-year high in the proportion of buy-to-let investors who intend to purchase their next property utilising a limited company structure. This is according to research undertaken on behalf of Paragon Bank which also highlights how the propensity to incorporate tends to increase with portfolio size. 47% of landlords who own between one and five properties expect their next purchase to be through a limited company, rising to 78% amongst those with portfolios consisting of six or more buy-to-let homes.

Of those who intend to expand their portfolios, 66% said that they plan to finance their next property investment through a buy-to-let mortgage, following an increase of four percentage points since the previous quarter. There has also been an increase in the proportion of landlords who plan to fund purchases by releasing equity from existing properties, up from 17% in Q1 2022 to 28% in Q2 2022. Conversely, purchasing outright using previously invested funds has decreased in popularity amongst those planning to buy, falling from 14% to 7% during the same period.

Purchasing a buy-to-let property through a limited company may not be the best route for all landlords but this is where the importance and value of a good, professional advice process comes into the equation as this remains a somewhat complex area. So, if you need some further information around the pros and cons attached to limited company borrowing why not contact us free of charge on 0800 170 1888.

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